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April 21, 2021
Many people want to retire before they are eligible for Medicare at age 65. However, figuring out health insurance — and how to afford that coverage — is very difficult. Health insurance for 55 and older can be very expensive, depending on your circumstances! And, let’s face facts, health factors are more prevalent and unpredictable at this age. You need answersThe very first NewRetirement “Ask me Anything” zoom seminar was focused on your questions about healthcare and retirement. Below we offer all of the real life questions and the expert answers about medical coverage before the age of 65. (Sign up for future “Ask me Anythings” and other live (Zoom) NewRetirement events.
Explore below the questions and answers about health insurance for 55 and over. (Or, Link to a summary of 9 Ways to Cover Early Retirement HealthCare Costs.)
Costs can vary widely depending on where you live, your income level, the type of coverage you choose and your health status. However, the average cost for a Silver Plan with the Affordable Care Act for two non-smoking adults age 58 — assuming no subsidies — would be $1,797 per month.
That might sound expensive. However, if you are eligible, the subsidies can slash the cost dramatically. With subsidies or not, getting coverage from the Affordable Care Act is usually going to be your best bet for health insurance for 55 or any age before Medicare kicks in.
However, the total costs for health insurance for 55 and over are going to be high. If you were funding the premiums for seven years — age 58-65 — without subsidies, it would total: $150,948 — plus other out of pocket expenses like co pays and out of pocket deductibles.
However, the costs will vary widely by state and county and whether you are eligible for subsidies or not. For instance, in California, where I live, the average cost at age 58 (without subsidies) of a Silver Plan is $2,134 — significantly higher than the nationwide average. You can get estimates for your location here.
NOTE: If eligible, the amount of your tax credit is based on the price of a silver plan in your area, but you can use your premium tax credit to purchase any Marketplace plan, including Bronze, Gold, and Platinum plans.
In order for you to get a better picture of your scenario you should visit the KFF subsidy calculator.
Good question. Not everyone realizes that medical costs are rising at a much higher rate than most other goods and services.
For healthcare inflation, you should assume two to three times the Consumer Price Index (CPI) rate. (The CPI is an inflation metric that measures average prices of a group of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item and averaging them.)
The NewRetirement Retirement Planner allows you to calculate your estimate for medical cost inflation separately from general inflation.
If you are retiring and have had coverage through your employer, you can fund a COBRA plan or get coverage privately or through the ACA. An advantage of COBRA is that you might get better pricing than is offered by the ACA as the cost to you will be 101% of your employer’s group coverage cost.
Furthermore, you will also be assured of having access to the same doctors and benefits that you had when you were employed.
However, the premiums for a plan under the ACA exchange might actually be cheaper, particularly if you qualify for premium tax credits.
You will have to compare after tax costs as well as plan features, e.g. PPO vs HMO, deductibles, out of pocket costs, etc.
It’s likely my wife and I will need to obtain insurance from the “open market” upon retirement when I turn 59.5 until Medicare starts. This is about 18 months away. Do you have any tips on “how to shop” the healthcare insurance market to make sure we are getting the best option in terms of cost and quality?
In general, your best bet for shopping for coverage is probably to visit Healthcare.gov. This web site will route you to your state’s exchange, if it has one. If it doesn’t, you shop plans offered through the Federal exchange.
Additional tips for getting the best coverage from the ACA include evaluating:
Your location: Costs are highly variable based on location — so you could consider a lower heatlh care cost state. However, lower costs might sometimes be indicative of lower quality.
Your Income: Your income level has to be pretty low to qualify for subsidies. However, there are substantial Premium Tax Credits made available through the Affordable Care Act (ACA) based on your income.
Tax credits are available for families with incomes of 100% to 400% of the Federal Poverty Level (FPL). These individuals and families will have to pay no more than 2.08% – 9.86% of their incomes for a mid-level plan (“silver”) premium.
Anything above that is paid by the government.
Type of Coverage: There are four levels of coverage available from the ACA: bronze, silver, gold, platinum. Choosing the right coverage for you and your needs can help you save money.
In general, the less you tend to use healthcare the more likely the lower level of coverage will suit you. If you use healthcare services more readily the more you will want to opt for higher premium, lower out of pocket plans, i.e. gold or platinum.
You will also have opportunities to compare the costs of different types of plans:
NOTE: Not all of these types are available everywhere.
Are there any states that offer plans that you can use nationwide under the ACA? We are going to be full timing in an RV. I’ve heard Florida does?
You are likely going to want to look for a PPO plan, which will offer benefits when using out of network providers.
An HMO plan will offer limited benefits outside of the health maintenance organization and may be limited to emergency care.
Your costs and the quality of services will differ from country to country. However, you will probably need to buy private international medical insurance from a specialty insurer.
International health insurance is usually cheaper than comparable U.S. health insurance. Cigna, Bupa and HTH Worldwide are three top international insurance companies to consider.
Here are more tips for retiring abroad.
Healthcare.gov will link you to your state’s exchange if it has one. If you are looking for information about healthcare, the Kaiser Family Foundation is a great resource for data.
Medishare — also known as health care sharing programs — are a relatively new way to fund healthcare.
These programs are defined by a group of like-minded people (Christian groups) banding together to help pay each other’s medical expenses.
Depending on your healthcare needs, it may not be the most affordable health care option though. You would want to have excellent health and decent savings to be able to pay for out of pocket costs for routine care (check ups, other routine screenings and other costs are not typically part of cost-sharing programs). The programs are designed to provide funding for the truly unexpected like broken bones and cancer.
A belief in the Christian faith is usually required to participate. (These health sharing programs are able to be formed based on legal religious exemptions.)
Here are some of the more popular Christian healthcare sharing programs:
Regarding the future of ACA, I would say that it is up in the air. However, healthcare appears to be a high priority political issue and a large majority of Americans — especially retirees — want preexisting conditions to be covered. So, I am cautiously optimistic that the ACA will continue to be available.
If I take advantage of Cobra to finish out a benefit year, can I sign up for an exchange plan for the next year or do I have to wait until the Cobra has expired in 18 months?
You can switch from COBRA to an ACA plan during the open enrollment period. Additionally, if your COBRA period has expired you may enroll in ACA outside of the open enrollment period. Note that failure to pay your premium does not count as COBRA expiration and will not enable you to enroll outside of the open enrollment period.
Also note that coverage for dependents can extend up to 36 months in total if the former employee becomes eligible for Medicare during the initial COBRA period.
What is the best asset allocation for an HSA account assuming at least $2,000 must remain in a cash account?
The asset allocation of your HSA will depend upon your age and the amount of money in the fund.
If you will be using the funds within the next few years then is should be in cash, cash equivalents and short term bonds.
Funds invested in the equity market should have a time horizon of a minimum of 5 years and allocations to higher risk assets such small cap stocks, emerging markets, etc. should have time horizons of ten years or more.
Note that at the current time, investment choices within most HSA plans are very limited.
Are there any tricks for making medical insurance before age 65 more affordable?
Many retirees choose to get a part time job that offers health coverage. This can actually be a great option.
Healthcare is the second biggest retirement cost after housing. So, good for you for thinking about how to budget your medical expenses.
The NewRetirement Retirement Planner has a variety of features that makes it relatively easy to reliably plan your health spending.
Estimate your total retirement healthcare expense now and find out if you can afford these important costs.
These questions were answered by a panel of retirement and healthcare experts:
Steve Chen, Founder, NewRetirement
Bill Smith, NewRetirement Advisors, Certified Financial Planner (CFP®) and Chartered Financial Analyst (CFA ®)
Mark Miller, Founder, Retirement Revised, Social Security and Medicare Expert
Fred Riccardi, President of the Medicare Rights Center
Michelle Dash, Financial Advisor, CFP ® Candidate
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